Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements

In accordance with ASC 820, the Company uses various inputs to measure the 2016 Warrants on a recurring basis to determine the fair value of the liability. ASC 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:

Level 1 – Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement date

Level 2 – Quoted prices in markets that are not active or inputs which are either directly or indirectly observable

Level 3 – Unobservable inputs for the instrument requiring the development of assumptions by the Company

The following table summarizes the Company’s 2016 Warrants measured at fair value within the hierarchy on a recurring basis as of September 30, 2016:

	Fair Value Measurements at
	September 30, 2016
	(in thousands)
	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	-	$	-	$	3,199	$	3,199

The Company did not have the 2016 Warrants at December 31, 2015.

The following table summarizes changes to the fair value of the Level 3 2016 Warrants for the nine months ended September 30, 2016:

	Fair Value of
	Warrant Liability
	(in thousands)
Balance at December 31, 2015	$	-
Issuance		4,619
Change in fair value		(1,420)
Balance at September 30, 2016	$	3,199

The Company utilized the Binomial Lattice Model for estimating the fair value of the 2016 Warrants using the following assumptions as of September 30, 2016:

	As of September 30,
	2016
Risk-free interest rate		1.14	%
Expected volatility		104	%
Expected term in years		5.3
Dividend yield		-	%

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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